GTHT has released a research report indicating that, overall, cracking margins for oil products both domestically and internationally have improved, with particularly strong performance overseas. Meanwhile, spreads for aromatics and olefins have been squeezed by naphtha, leading to mixed results in downstream segments. In July, cracking spreads for gasoline and diesel at domestic refineries continued to improve month-on-month, while US oil product cracking spreads also strengthened. Naphtha costs remained firm, but price increases for aromatics products were constrained, causing cracking spreads for benzene, toluene, and xylene relative to naphtha to decline month-on-month. The report recommends focusing on the polyester industry and refining leaders, where pressure from costs and demand is easing, promising improved industry conditions.
GTHT's main observations are as follows: July 2026 spread data shows significant divergence across sectors. (1) In the oil products segment, cracking spreads for gasoline and diesel at domestic refineries improved month-on-month, with increases of 30.6% and 67.8%, respectively, though these values remain at historically low levels for the past five years at 29.7% and 37.8%. Overseas, cracking spreads for gasoline, diesel, and kerosene are at five-year highs, strengthening in July, especially for diesel. (2) In the olefins and downstream segment, spreads declined month-on-month for most products except propylene oxide and polypropylene, with cracking spreads for propylene-naphtha and ethylene-naphtha falling 71.1% and 60.1%, respectively. (3) In the aromatics and chemical fiber segment, the toluene-naphtha spread fell 68.3% month-on-month, with similar declines for benzene and xylene spreads, while spreads for polyester and nylon chips recovered. (4) The maleic anhydride spread significantly improved, and the co-production spread for dimethyl carbonate and ethylene glycol also surged 106%, while methanol and butyl acrylate spreads weakened.
Overall, cracking margins for oil products improved both domestically and internationally, with overseas markets being particularly strong. Spreads for aromatics and olefins were squeezed by naphtha again, resulting in mixed downstream performance.
In July, cracking spreads for gasoline and diesel at domestic refineries continued to improve month-on-month. First, lower crude oil costs provided room for margin expansion, with domestic oil product prices supported by the current adjustment mechanism, falling less than crude prices and widening wholesale-retail spreads. Second, seasonal peak demand for oil products offered solid spot market support. July coincided with the summer travel peak, with significant increases in driving trips and cross-province tourism, leading to a strong rebound in gasoline consumption. Diesel demand also recovered from the suppression of the rainy season in June, accelerating inventory drawdowns. Third, while refinery utilization rates at domestic and local refineries rose in July, they remained relatively low, and social inventories declined notably, with some regions experiencing tight product specifications, providing strong support for oil product prices.
In July, US oil product cracking spreads strengthened month-on-month, with the biggest increase in jet fuel spreads. On the demand side, July marked the peak of the US summer travel season, and large-scale events boosted cross-regional and international flights, pushing domestic jet fuel demand to a new high. This travel-driven consumption directly strengthened spot buying for jet fuel. On the supply side, US refineries maintained high utilization rates, but during the traditional gasoline consumption peak, refineries reduced jet fuel output, leading to a month-on-month decline in jet fuel production. Additionally, supply gaps persisted in Europe and Asia, and disruptions to oil product exports from the Middle East had not fully subsided, prompting overseas markets to continue purchasing US jet fuel. This, combined with inventory drawdowns for jet fuel, contrasted with trends for gasoline and diesel inventories, amplifying cracking spread volatility.
In July, average monthly spreads for the "three benzenes" (benzene, toluene, xylene) relative to naphtha declined. On the cost side, naphtha supply remained tight due to geopolitical disturbances in the Middle East, keeping Asian naphtha prices resilient and raising feedstock costs, which squeezed processing margins for aromatics. On the demand side, the traditional off-season saw weak operating rates in downstream sectors like styrene, solvents, and chemical fibers, with end-user consumption recovery falling short of expectations. This made it difficult to pass on higher costs, limiting price increases for aromatics products. The combination of firm naphtha costs and constrained price increases for aromatics led to a month-on-month decline in cracking spreads for benzene, toluene, and xylene relative to naphtha.
Risk factors include changes in macroeconomic policies, significant crude oil price volatility, force majeure events, geopolitical shifts, and demand falling short of expectations.